Your Electric Bill - Understanding the Charges


A typical electric bill has a couple cost items incorporated into it. See the image below for an example of an electricity bill (this bill is my actual bill for the period of Oct 18 to Dec 21, 2010 with the LDC’s information removed)


The electricity costs seen on an electricity bill (mine or yours) generally includes charges from four (4) different companies / parties. Your LDC (local distribution company) collects the full amount and distributes payment to the other parties. The four parties are:

1. The Power Generator is paid the commodity price of the electricity you used. On your bill this is the rate per kilowatt-hour (kWh) used. There are many types of power generators. You might even be a power generator - if you produce and sell electricity to the grid. Not all power generators receive the same price per kWh produced. The large utility generators (nuclear plants, coal plants, hydroelectric, and natural gas peaking plants) usually receive the spot market price for electricity. Some generators have separate contracts to receive a set price (higher than the average price you pay) to produce electricity from renewable energy sources. There are numerous other programs that that pay generators differing commodity prices. The average adjusted rate is what you and I pay.

2. The Transmission Company is paid a portion of the delivery charges. Power is transmitted (moved) at a high voltage from the generator to a substation near your city. The transmission lines are generally the lines you see way up in the air on large steel towers. At the substations, the voltage is reduced and the LDC then distribute the power to your home. The portion of the delivery charge than goes to the transmission company goes towards the maintenance and upgrading of the transmission system (the substations and high voltage transmission lines)

3. The LDC (local distribution company) owns the power lines you see outside your home. The name your see on your bill is the LDC. Similar to the transmission company the LDC receive a portion of the delivery costs. This money is used to maintain and upgrade the local distribution system.

4. Your local jurisdiction maintaining electrical grid stability receives the other money collected from you. In Ontario it is the provincial government. The regulatory charges on my bill go towards the costs of administering the wholesale electricity system and maintaining the reliability of the provincial grid.

The debt retirement charge goes to reducing the debt of the former Ontario Hydro which was split up into five (5) successor companies in 1999.


The amount we pay for delivery, regulatory and debt reduction is somewhat tied to amount of electricity we are using.

So when we reduce our electricity usage all charges will go down. This is the way to save on your electric bill.

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